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You may have heard some of the buzz around bitcoin and blockchain technology. Now, there’s a new player in real estate technology raising funds and distributing tokens backed by ethereum (ETH), a blockchain-based currency. In an effort to create a decentralized real estate data and listings platform, REXMLS just launched their first token sale. You might think this sounds like a real estate data game changer or maybe a creative way to raise money. So is REX just the next penny stock pump and dump scheme or is there a real value and market fit for this new technology?

Either way, they hit the market this past week by selling REX Tokens at an exchange of 1,000 tokens to one ETH. As of August 11, ethereum is trading at $301, up 2,480% from a year prior.

REXMLS hit a major speed bump in their recent initial coin offering (ICO), losing $1.33 million worth of ethereum coins by sending coins to an incorrect address. It’s an upsetting start to a potentially disruptive business model, but the founders of REX covered the losses and life moves on.

What does this have to do with real estate?

Real estate data has been a war zone for decades. Data giants in both residential and commercial real estate have controlled information and consumers' access to it. The problem is, most data is submitted by individuals actually at the site or property (i.e. brokers, titles companies, appraisers, etc.). This data is then funneled to data aggregates that collect, organize and then distribute this data for a fee. So, often it's the same people who provide this data who end up paying for it.

Enter peer-to-peer platforms and REXMLS.

REX set out to decentralize this data and provide a platform that allows for an exchange of data for all real estate professionals based on blockchain ledgers. It’s a big idea, backed by a cryptocurrency that continues a meteoric rise in global markets. It’s also a great time for them to enter the market, with people’s eagerness to get in on the bitcoin movement.

What are the potential obstacles?

People fear change. This is multiplied exponentially when you lose $1.5 million in a few hours. However, peer to peer platforms have a lot of value and people will forget about an early hiccup like what happened to REXMLS. The obstacle I see is adoption. It’s more about hitting critical mass with users than it is about the data. I've personally experienced this challenge in the early days of Brevitas (a peer to peer real estate marketplace) -- simply put, gaining adoption in real estate tech is hard.

Real estate brokers and investors need real-time data and you must meet a certain saturation threshold to make that data relevant. Real estate investors won’t be interested in seeing partial market coverage. They want to know all of the available for sale or for lease properties in a given area in order to make sound investment decisions.

The education and training needed to get users up to speed is a big challenge too, and I see this being the first hurdle for REXMLS. Especially considering most real estate professionals aren’t bitcoin enthusiasts, thorough education is needed on blockchain, ethereum and REX Tokens.

How does it work?

To understand what REXMLS is doing, it's important to understand a few key terms:

Blockchains are ledgers (or databases) that are open to an entire community which can regulate its accuracy as a decentralized network. The ledger can only be added to when there is a consensus among the rest of the group, making it a secure peer-to-peer system that is self-regulated by its participants. The decentralized ledger is shared publicly for anyone to access the secure database. In order for a transaction to be approved in the shared ledger, it must be validated by the group as a whole. This creates an irreversible record that cannot be tampered with, even by its operators. The ledger works as a continuous record that controls the structure of information and eliminates duplication.

Ethereum is a platform for decentralized applications to run on blockchain. Using smart contracts to validate transactions, ethereum runs on a decentralized platform that is secure, corruption proof and has limited downtime. While both bitcoin and ethereum run on a distributed ledger system (blockchain), their purpose is fundamentally different. Bitcoin is to financial transactions as ethereum is to contract law and business logic. That's a vast oversimplification, but it provides a basis to begin to think about the two. Bitcoin (BTC) was built from the ground up as an alternative to cash; its primary purpose is to store value and securely transact on the web without requiring a third party like PayPal. Ethereum has been developed as a platform that allows peer-to-peer contracts and applications by its own digital currency. One way to think about ethereum is as a global virtual machine, or a computer that anyone can access and use for anything at any time for a fee.

Smart contracts create a way for logic or conditions to be applied to a blockchain transaction. Think of them as contingencies: if these contingencies are met, the smart contract will execute the digital transaction. This is an obvious similarity to the current real estate title and escrow exchange.

REX Tokens are powered by the ethereum blockchain. They will be used to reward users for adding listings, becoming market sponsors, or adding profile information. There is a limited amount of REX Tokens (2,5000,000) and they are being acquired now in exchange for ethereum coins. REXMLS later plans to use these tokens as the foundation for their smart contracts and title exchange on their platform.

Where is the opportunity for investors?

Ethereum might be a bigger opportunity to those looking for an angle. It's just as dynamic as Bitcoin and has endless potential applications. That's evidenced by the hundreds of tech start ups like REXMLS that are building their new businesses on Ethereum. With its flexibility and potential to self-regulate with smart contracts, there may be thousands of more applications coming.

The real estate industry is fragmented and opaque; I’m not sold that it’s going to be an easy task to disrupt the MLS or CoStar. I’d keep an eye on REXMLS, then buy a few ETH to hold onto for the future.